# Perpetual: Income effects of inventory methods LO A1

Exercise 5-4 Perpetual: Income effects of inventory methods LO A1

 Laker Company reported the following January purchases and sales data for its only product.
 Date Activities Units Acquired at Cost Units Sold at Retail Jan. 1 Beginning inventory 230 units @  \$8.60 = \$ 1,978 Jan. 10 Sales 130 units @\$16.60 Jan. 20 Purchase 300 units @  \$7.60 = 2,280 Jan. 25 Sales 225 units @\$16.60 Jan. 30 Purchase 170 units @  \$6.60 = 1,122 Totals 700 units \$ 5,380 355 units
 Laker uses a perpetual inventory system. For specific identification, ending inventory consists of 345 units, where 170 are from the January 30 purchase, 80 are from the January 20 purchase, and 95 are from beginning inventory.
1. Complete comparative income statements for the month of January for Laker Company for the four inventory methods. Assume expenses are \$2,400, and that the applicable income tax rate is 39%. (Do not round your Intermediate calculations.)

2. Which method yields the highest net income?
 [removed] Specific identification [removed] LIFO [removed] FIFO [removed] Weighted average

3. Does net income using weighted average fall between that using FIFO and LIFO?
 [removed] Yes [removed] No

4. If costs were rising instead of falling, which method would yield the highest net income?
 [removed] Weighted average [removed] LIFO [removed] Specific identification [removed] FIFO

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